Investing your money where your morals are has always been risky business, particularly in light of an amoral stock market that couldn’t care less about whether a company is saintly or sinful. To say nothing of the fact that one person’s sin can be another’s claim to godliness.
A new player on the social investing scene is making the issue even more complex.
Scott Fehrenbacher, a former stockbroker in Spokane, and columnist with The Spokesman-Review, is helping investors divine which mutual funds to buy, based on whether companies in the funds’ portfolios represent “American values.”
He says he launched his “Institute for American Values Investing” seven months ago, and that he screens for an altogether different set of criteria than the old-fashioned social responsibility crowd that shuns companies that do animal testing or sell tobacco and booze.
A fund that owned stock in a company that provided health benefits to gay couples, for example, would receive demerits for that policy. Similarly, funds with too many stocks of companies involved with pornography, abortion-related products, or “blasphemous” movies (Disney’s “Priest”) can land on the “red light” list.
The latest maverick in moral investing is, as it happens, no saint himself in the eyes of unhappy investors who took action against him when he was a stockbroker.
Since 1992, Fehrenbacher and one of his former employers have entered items on his regulatory records that include a personal bankruptcy, an ongoing investigation by the National Association of Securities Dealers, a termination on bad terms with a brokerage house, three customer complaints and an arbitration.
Fehrenbacher says the problems cropped up late in his 14-year tenure as a broker as a result of two events in his life: a serious, and ultimately uninsured illness of his wife, and an admitted decline of attention paid to his customers as he prepared to launch American Values Investing, his “institute” to seek out companies that commit “cultural pollution.”
The allegations against him include unauthorized trades (settled), unsuitable investments (pending) and improper disclosure of commissions (settled).
“Because I moved my practice to Seattle in anticipation of starting this business, it made it far more difficult for customers to communicate with me,” says Fehrenbacher. “I wish I could have handled communications in that transition far more effectively.”
Today, the former stock broker is likely irritating companies and competitors more than he is neglected investors. In producing a green, yellow and red light rating system for mutual funds, he creates a black list of funds that don’t satisfy “socially conservative” values.
Those companies that don’t make the cut to the green or yellow light categories flunk for such things as anti-family entertainment, abortion services, or promotion of nonmarriage lifestyles.
Of the roughly 10,000 publicly traded companies, he said only 203 flunk the criteria set by American Values and the two-dozen like-minded organizations Fehrenbacher works with.
He said he notifies each one of their status. If they can cite errors in the information that led to the rating, the scoring can be changed, he said.
Fehrenbacher is insistent that all he does is screen for funds that include socially conservative companies in their portfolios. “We absolutely have not and won’t make recommendations,” he said, explaining that his customers can use his lists as they wish.
“We’re not about censorship. We’re not about boycotts,” he said.
However he packages it, though, reality is this: anyone who subscribes to his newsletter or his quarterly software screen is likely doing so for ideas of companies to choose or avoid by virtue of their values rating.
So who’s virtuous, if not the rater himself? In the current issue of The Investigator, Fehrenbacher’s 10-times-a-year newsletter, only five of the 29 most widely held funds merited a “green light.” Highestranking for investment purity: Franklin U.S. Government Fund.
He takes a shot, meanwhile, at his “socially responsible” competition, giving “red light” ratings to five funds that are popular with the social responsibility crowd: Citizens Index Fund, Women Equity Fund, Rightime Social Awareness Fund, Domini Social Equity Fund and Calvert Social Investment Fund all flunk the “morally responsible” test with Fehrenbacher.
But even where he differs from the managers of conventional socially responsible funds, Fenrenbacher said that all are united in trying to focus investor attention on the social implications of their personal financial decision-making.
In making suggestions to his own flock, Fehrenbacher says subscribers who are opposed to active promotion of gay lifestyles might not want to invest in the Reynolds Blue Chip fund, which had the worst “values” rating of more than 7,000 funds last time Fehrenbacher published his newsletter.
But its values weren’t looking too shabby if you were looking for profits.
Net asset value of the Reynolds Blue Chip Fund rose 26 percent in 1996 while the Dow Jones Industrial Average gained 24 percent. The Timothy Fund, a “green light” Christian values fund whose president is a columnist for The Investigator, gained less than half that: 10 percent in the same period.
Fehrenbacher isn’t afraid to take a stand in his Investigator newsletter, blasting pro-abortionists who support RU-486 and wagging his finger at Viacom for its MTV, which fosters short attention spans, presents anti-establishment news and pushes soft porn, in his view.
, DataTimes ILLUSTRATION: Photo
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